Withey: Start early, show your child how to be smart with money

In today’s cashless society, a piggy bank isn’t the only way children can learn to save their allowance.

Photograph by: Shaughn Butts
, Edmonton Journal

EDMONTON - When I give my son money, he throws it away.

It doesn’t seem to matter how much I hand over, or the value of the coin. I place the money in my little boy’s hand, he smiles, then tosses it into his favourite water fountain.

Money’s still a plaything to a two-year-old. It makes noise, it sparkles, it might even taste good.

But it doesn’t take a child long to figure out the power of cash (beyond a fountain splash). And in an era of overspending and frightening household debt levels, it seems a parent’s duty to teach children good money sense, to prepare them for battle against the material temptations and personal-line-of-credit offers to come.

Deborah Kerbel and her father Gordon Pape bore the weight of that responsibility in mind as they wrote Money Savvy Kids (Penguin Canada). The slim volume, released in January 2013, offers practical advice to Canadian parents on how to raise money-smart kids.

Kerbel, a mother of two school-aged children, was in the perfect stage of parenting to do the research for the book. Her then-five-year-old had been nagging her for an allowance “and I didn’t know how to answer to him,” Kerbel told me from her home in greater Toronto. “I kept putting it off, wondering, is this a good idea or not?”

Her first reaction was to say no for selfish reasons. “As a parent, I thought, what do I need another responsibility for, making sure I have the money every week, remembering to give it to them, having to take them to the store to buy things. And then all that extra junk coming into the house that I’m going to have to deal with.”

I get that. I mean, sure I want my son to learn how money works, but I really want him to spend it wisely, not waste it on dollar-store doodads or some horribly messy treat that will end up all over the walls.

But the importance of giving children allowances — so they can spend, save and screw up — is a key message in Money Savvy Kids. “They need a little bit in their own hands to learn, and to make some mistakes,” Kerbel said. “Maybe I spent it all on candy when I really wanted to save up for a bicycle.” It’s vital children learn that “if I blow it all, there’s no one who’s going to appear to save me.”

The book recommends children start receiving an allowance at the age of seven. But kids can learn even earlier what money is, and how it works. “(Age) five or six is the beginning,” she said. “They understand numbers and they can count, and they’re trying to figure out the ins and outs of the world.”

Money Savvy Kids meshes together the daughter-dad duo’s financial, literary and parenting expertise. Kerbel writes fiction for young adults; Pape is one of the country’s leading personal finance experts, author of several books on the subject.

“It was nice working with my dad,” Kerbel said. The pair split up the work according to their strengths. “I’m not a financial expert and I wouldn’t want to pretend to be,” she noted.

Kerbel sings the praises of virtual allowance trackers in our increasingly cashless society. Not only can kids check their balance on an iPad app, it saves parents the hassle of handing out coins/bills every week. Websites like FirstKidBank.com offer parents and a child a way of tracking savings and spending.

Allowance amounts are added to the virtual balance and then, if the child wants a chocolate bar, the parent pays for it and deducts the cost from the virtual account. (That’s not to say a child can’t save up in a piggy bank anymore, although with the death of the Canadian penny, it will become increasingly difficult to teach them the value of one cent.)

The big question, for me, was this: how does a parent teach her kid good money sense in a society with terrible money sense? Canadians’ consumer debt is at a record high. Just this month, credit agency TransUnion reported that the average Canuck has more than $27,000 in personal debt (not including a mortgage).

How, in this climate, can a child comprehend the importance of sticking to the budget, saving for a rainy day and living within one’s means? How does a little boy or girl appreciate the need to delay gratification (i.e. save up for the bicycle) when his mom and dad pay with credit cards, get lines of credit and make minimum payments?

Money Savvy Kids raises that issue right off the bat, Kerbel said. Parents, of course, ought to lead by example. The book has readers take a survey to test their own financial knowledge (and recognize their own flaws) as they embark on the quest to teach a child good money sense.

“Kids DO watch their parents. You may not think they’re watching, but they do watch. You need to get your own financial house in order so you can have a solid foundation,” she said. “Hopefully, we can start this new generation off on the right foot, understanding how not to get yourself into debt, how to only buy things you have the money for.”

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